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SAIC

"Continued momentum enabled by the execution of our strategy against an improving federal budget environment allows us to invest for the future in both innovative technologies and new business opportunities."

RESTON, Va.--(BUSINESS WIRE)--Science Applications International Corporation (NYSE: SAIC), a leading
technology integrator providing full life-cycle services and solutions
in the technical, engineering, intelligence, and enterprise information
technology markets, today announced results for the first quarter ended
May 4, 2018.

“Solid execution in the first quarter of fiscal year 2019 resulted in
SAIC’s third consecutive quarter of revenue growth and strong cash flow
generation,” said SAIC CEO Tony Moraco. “Continued momentum enabled by
the execution of our strategy against an improving federal budget
environment allows us to invest for the future in both innovative
technologies and new business opportunities."

First Quarter of Fiscal Year 2019: Summary
Operating Results

Three Months Ended

May 4, 2018

Percentchange

May 5, 2017

(in millions, except per share amounts)

Revenues

$

1,175

7

%

$

1,103

Operating income

66

5

%

63

Operating income as a percentage of revenues

5.6

%

-10

bps

5.7

%

Net income

49

—

%

49

EBITDA(1)

76

4

%

73

EBITDA as a percentage of revenues

6.5

%

-10

bps

6.6

%

Diluted earnings per share

$

1.13

5

%

$

1.08

Net cash provided by operating activities

$

88

—

%

$

88

Free cash flow(1)

$

82

(2

)%

$

84

(1) Non-GAAP measure, see Schedule 5 for
information about this measure.

Revenues for the quarter increased $72 million, or 6.5%, compared to the
prior year quarter due to revenue on new contracts primarily supporting
NASA and the Environmental Protection Agency (EPA) ($47 million) and
increased orders in our supply chain portfolio ($64 million). These
increases were partially offset by completion of contracts and other net
decreases across our portfolio ($39 million).

Operating income as a percentage of revenues decreased to 5.6%, compared
to 5.7% for the prior year quarter, driven by higher supply chain
material content which generate lower operating margins.

Net income for the quarter remained consistent as compared to the same
period in the prior year. Higher operating income was offset by a lower
tax deduction from stock-based compensation in the current quarter.

EBITDA(1) as a percentage of revenues for the quarter
decreased to 6.5%, compared to 6.6% for the prior year quarter, driven
by higher supply chain material content which generate lower operating
margins.

Diluted earnings per share was $1.13 for the quarter. The
weighted-average diluted shares outstanding during the quarter was 43.4
million shares.

(1) Non-GAAP measure, see Schedule 5 for
information about this measure.

Cash Generation and Capital Deployment

Total cash flows provided by operating activities for the first quarter
were $88 million, consistent with the same period in the prior year. A
net increase in working capital investments in platform integration
programs supporting the U.S. Navy and Marine Corps was offset by strong
customer collections in the current quarter.

During the quarter SAIC deployed $54 million of capital, consisting of
$32 million in plan share repurchases (412 thousand shares) under SAIC’s
previously announced share repurchase program, $14 million in cash
dividends and an $8 million term loan repayment.

Quarterly Dividend Declared

Subsequent to quarter-end, the Company’s Board of Directors declared a
cash dividend of $0.31 per share of the Company’s common stock payable
on July 27, 2018 to stockholders of record on July 13, 2018. SAIC
intends to continue paying dividends on a quarterly basis, although the
declaration of any future dividends will be determined by the Board of
Directors each quarter and will depend on earnings, financial condition,
capital requirements and other factors.

New Business Awards

Net bookings for the quarter were approximately $1 billion, which
reflects a book-to-bill ratio of 0.8. SAIC’s estimated backlog of signed
business orders at the end of the quarter was approximately $10 billion
of which $1.9 billion was funded.

SAIC was awarded the following contracts during the quarter:

Notable Protect Awards (maintaining our
existing contract base):

The U.S. Army Human Resources Command: SAIC was awarded a $108
million task order by the Army Human Resources Command to continue to
develop, operate, and maintain more than 191 virtual applications that
support soldiers from enlistment to retirement. Awarded under the
Information Technology Enterprise Solutions - 2 Services (ITES-2S)
contract vehicle, the single award task order has a one-year base period
of performance, a one-year option, and a total contract value of
approximately $108 million, if the option is exercised.

The U.S. Army Aviation and Missile Life Cycle Management Command
(AMCOM): SAIC was awarded a $98 million task order by AMCOM to
provide information technology (IT) support services. The Information
Technology Support Services III task order has a one-year base period of
performance, a one-year option, and an additional two-month option. The
task order was awarded under the Information Technology Enterprise
Solutions-2 contract vehicle.

The U.S. Navy: SAIC was awarded a $73 million task order by the
U.S. Navy's Space and Naval Warfare Systems Command (SPAWAR) to provide
architecture and systems engineering support services to the Office of
the Chief Engineer (CHENG) (SPAWAR 5.0), the Fleet Readiness Directorate
(FRD), and various C4ISR programs and offices. The single-award task
order has a one-year base period of performance, and four one-year
options. The task order was awarded under the SeaPort-e contracting
vehicle.

The U.S. Army and the General Services Administration (GSA): SAIC
was awarded a $205 million task order by GSA, on behalf of the U.S. Army
Aircraft Survivability Equipment (ASE) Project Management Office (PMO),
to provide engineering, program management, and technical support
services. Awarded under the GSA One Acquisition Solution for Integrated
Services (OASIS) contract vehicle, the task order has a one-year base
period of performance and four one-year options.

NASA: SAIC will now manage NASA’s cloud-based web services under
a new $58 million task order to provide the agency with various web
support services. The task order was awarded under the NASA Enterprise
Applications Service Technologies (EAST) 2 Master Agreement and will
span roughly seven years, if all options are exercised. Under the task
order, SAIC will support NASA with its existing agency-wide, cloud-based
hosting capabilities. These services include the creation, maintenance,
and management of websites, web applications, and other ancillary
services.

Webcast Information

SAIC management will discuss operations and financial results in an
earnings conference call beginning at 5 p.m. Eastern time on June 12,
2018. The conference call will be webcast simultaneously to the public
through a link on the Investor Relations section of the SAIC website (http://investors.saic.com).
We will be providing webcast access only – “dial-in” access is no longer
available. Additionally, a supplemental presentation will be available
to the public through links to the Investor Relations section of the
SAIC website. After the call concludes, an on-demand audio replay of the
webcast can be accessed on the Investor Relations website.

About SAIC

SAIC is a premier technology integrator providing full life cycle
services and solutions in the technical, engineering, intelligence, and
enterprise information technology markets. SAIC is Redefining Ingenuity
through its deep customer and domain knowledge to enable the delivery of
systems engineering and integration offerings for large, complex
projects. SAIC’s more than 15,000 employees are driven by integrity and
mission focus to serve customers in the U.S. federal government.
Headquartered in Reston, Virginia, SAIC has annual revenues of
approximately $4.5 billion. For more information, visit saic.com.
For ongoing news, please visit our newsroom.

Forward-Looking Statements

Certain statements in this release contain or are based on
“forward-looking” information within the meaning of the Private
Securities Litigation Reform Act of 1995. In some cases, you can
identify forward-looking statements by words such as “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,” “guidance,”
and similar words or phrases. Forward-looking statements in this release
may include, among others, estimates of future revenues, operating
income, earnings, earnings per share, charges, total contract value,
backlog, outstanding shares and cash flows, as well as statements about
future dividends, share repurchases and other capital deployment plans.
Such statements are not guarantees of future performance and involve
risk, uncertainties and assumptions, and actual results may differ
materially from the guidance and other forward-looking statements made
in this release as a result of various factors. Risks, uncertainties and
assumptions that could cause or contribute to these material differences
include those discussed in the “Risk Factors,” “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and
“Legal Proceedings” sections of our Annual Report on Form 10-K, as
updated in any subsequent Quarterly Reports on Form 10-Q and other
filings with the SEC, which may be viewed or obtained through the
Investor Relations section of our website at www.saic.com
or on the SEC’s website at www.sec.gov.
Due to such risks, uncertainties and assumptions you are cautioned not
to place undue reliance on such forward-looking statements, which speak
only as of the date hereof. SAIC expressly disclaims any duty to update
any forward-looking statement provided in this release to reflect
subsequent events, actual results or changes in SAIC’s expectations.
SAIC also disclaims any duty to comment upon or correct information that
may be contained in reports published by investment analysts or others.

Schedule 1:

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

May 4, 2018

May 5, 2017

(in millions, except per share amounts)

Revenues

$

1,175

$

1,103

Cost of revenues

1,074

1,007

Selling, general and administrative expenses

35

33

Operating income

66

63

Interest expense

12

11

Other (income) expense, net

(1

)

—

Income before income taxes

55

52

Provision for income taxes

(6

)

(3

)

Net income

$

49

$

49

Weighted-average number of shares outstanding:

Basic

42.4

43.7

Diluted

43.4

45.5

Earnings per share:

Basic

$

1.16

$

1.12

Diluted

$

1.13

$

1.08

Cash dividends declared and paid per share

$

0.31

$

0.31

Schedule 2:

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED BALANCE SHEETS

(Unaudited)

May 4, 2018

February 2, 2018

(in millions)

ASSETS

Current assets:

Cash and cash equivalents

$

152

$

144

Receivables, net

671

674

Inventory, prepaid expenses and other current assets

107

132

Total current assets

930

950

Goodwill

863

863

Intangible assets, net

174

179

Property, plant, and equipment, net

66

61

Other assets

28

20

Total assets

$

2,061

$

2,073

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

466

$

504

Accrued payroll and employee benefits

184

150

Long-term debt, current portion

45

41

Total current liabilities

695

695

Long-term debt, net of current portion

971

983

Other long-term liabilities

70

68

Total equity

325

327

Total liabilities and equity

$

2,061

$

2,073

Schedule 3:

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

May 4, 2018

May 5, 2017

(in millions)

Cash flows from operating activities:

Net income

$

49

$

49

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

11

10

Stock-based compensation expense

8

8

Increase (decrease) resulting from changes in operating assets and
liabilities:

Receivables

8

(43

)

Inventory, prepaid expenses and other current assets

7

23

Other assets

(6

)

1

Accounts payable and accrued liabilities

(24

)

16

Accrued payroll and employee benefits

34

22

Other long-term liabilities

1

2

Net cash provided by operating activities

88

88

Cash flows from investing activities:

Expenditures for property, plant, and equipment

(6

)

(4

)

Net cash used in investing activities

(6

)

(4

)

Cash flows from financing activities:

Dividend payments to stockholders

(14

)

(14

)

Principal payments on borrowings

(8

)

(9

)

Issuances of stock

2

2

Stock repurchased and retired or withheld for taxes on equity awards

(53

)

(65

)

Disbursements for obligations assumed from Scitor acquisition

—

(2

)

Deferred financing costs

(1

)

—

Net cash flows used in financing activities

(74

)

(88

)

Net increase (decrease) in cash, cash equivalents and restricted cash

8

(4

)

Cash, cash equivalents and restricted cash at beginning of period

152

218

Cash, cash equivalents and restricted cash at end of period

$

160

$

214

Schedule 4:

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

BACKLOG

(Unaudited)

The estimated value of our total backlog as of the dates presented
was:

May 4, 2018

February 2, 2018

(in millions)

Funded backlog

$

1,898

$

2,012

Negotiated unfunded backlog

8,145

8,215

Total backlog

$

10,043

$

10,227

Backlog represents the estimated amount of future revenues to
be recognized under negotiated contracts and task orders as work
is performed and excludes contract awards which have been
protested by competitors until the protest is resolved in our
favor. SAIC segregates backlog into two categories, funded backlog
and negotiated unfunded backlog. Funded backlog for contracts with
government agencies primarily represents contracts for which
funding is appropriated less revenues previously recognized on
these contracts, and does not include the unfunded portion of
contracts where funding is incrementally appropriated or
authorized by the U.S. government and other customers even though
the contract may call for performance over a number of years.
Funded backlog for contracts with non-government agencies
represents the estimated value of contracts which may cover
multiple future years under which SAIC is obligated to perform,
less revenues previously recognized on these contracts. Negotiated
unfunded backlog represents the estimated future revenues to be
earned from negotiated contracts for which funding has not been
appropriated or authorized, and unexercised priced contract
options. Negotiated unfunded backlog does not include any estimate
of future potential task orders expected to be awarded under
indefinite delivery, indefinite quantity (IDIQ), U.S. General
Services Administration (GSA) schedules or other master agreement
contract vehicles.

Schedule 5:

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

NON-GAAP FINANCIAL MEASURES

(Unaudited)

This schedule describes the non-GAAP financial measures included in
this earnings release. While we believe that these non-GAAP
financial measures may be useful in evaluating our financial
information, they should be considered as supplemental in nature and
not as a substitute for financial information prepared in accordance
with GAAP. Reconciliations, definitions, and how we believe these
measures are useful to management and investors are provided below.
Other companies may define similar measures differently.

EBITDA

Three Months Ended

May 4, 2018

May 5, 2017

(in millions)

Net income

$

49

$

49

Interest expense

12

11

Interest income

(1

)

—

Provision for income taxes

6

3

Depreciation and amortization

10

10

EBITDA(1)

$

76

$

73

EBITDA as a percentage of revenues

6.5

%

6.6

%

EBITDA is a performance measure that is calculated by taking
net income and excluding interest, provision for income taxes, and
depreciation and amortization. We believe that this performance
measure provides management and investors with useful information
in assessing trends in our ongoing operating performance and may
provide greater visibility in understanding the long-term
financial performance of the Company.

(1) Non-GAAP measure, see above for
definition.

Free Cash Flow

Three Months Ended

May 4, 2018

May 5, 2017

(in millions)

Net cash provided by operating activities

$

88

$

88

Expenditures for property, plant, and equipment

(6

)

(4

)

Free cash flow(1)

$

82

$

84

Free cash flow is calculated by taking cash flows provided by
operating activities less expenditures for property, plant, and
equipment. We believe that free cash flow provides management and
investors with useful information in assessing trends in our cash
flows and in comparing them to other peer companies, many of whom
present a similar non-GAAP liquidity measure. This measure should
not be considered as a measure of residual cash flow available for
discretionary purposes.